Income Taxes

The components of loss before income taxes are presented below:



	Year Ended December 31,
	2017			2016			2015
Domestic	$	(71,343	)	$	(157,067	)	$	(69,287	)
Foreign	(58,357		)	(37,084		)	(17,691		)
Loss before income taxes	$	(129,700	)	$	(194,151	)	$	(86,978	)

The components of income tax expense (benefit) are presented below:



	Year Ended December 31,
	2017			2016			2015
U.S. federal income taxes:
Current	$	27		$	(17	)	$	22
Deferred	(523		)	1,396			1,732
Foreign income taxes:
Current	(379		)	(393		)	(123		)
Deferred	(2,269		)	(5,177		)	(1,003		)
State income taxes:
Deferred	264			314			388
Income tax expense (benefit)	$	(2,880	)	$	(3,877	)	$	1,016

Income tax expense (benefit) for the years ended December 31, 2017, 2016 and 2015 differed from amounts computed by applying the applicable U.S. federal corporate income tax rate of 34% to loss before income taxes as a result of the following:



	2017			2016			2015
Computed statutory income tax benefit	$	(44,098	)	$	(66,011	)	$	(29,573	)
State and provincial income tax benefit, net of federal income taxes	(3,294		)	(7,905		)	(3,157		)
Nondeductible stock based compensation	4,147			3,321			3,182
Nondeductible officer compensation	476			—			2,433
Gain on dividend distribution of AquaBounty common stock	3,965			—			—
Impairment of goodwill	4,700			—			—
Research and development tax incentives	(1,166		)	(6,350		)	(348		)
Acquisition and internal restructuring transaction costs	354			571			883
Provisional impact of the Tax Act	85,288			—			—
Enacted changes in foreign tax rates and foreign tax reforms	2,138			—			(961		)
U.S.-foreign rate differential	5,410			3,463			620
Other, net	(64		)	1,485			(98		)
	57,856			(71,426		)	(27,019		)
Change in valuation allowance for deferred tax assets	(60,736		)	67,549			28,035
Total income tax expense (benefit)	$	(2,880	)	$	(3,877	)	$	1,016

The tax effects of temporary differences that comprise the deferred tax assets and liabilities as of December 31, 2017 and 2016, are as follows:



	2017			2016
Deferred tax assets
Allowance for doubtful accounts	$	1,300		$	1,676
Inventory	489			447
Equity securities and investments in affiliates	17,510			31,729
Accrued liabilities and long-term debt	3,131			4,168
Stock-based compensation	26,936			8,460
Deferred revenue	61,785			68,056
Research and development tax credits	11,385			10,396
Net operating and capital loss carryforwards	111,453			144,502
Total deferred tax assets	233,989			269,434
Less: Valuation allowance	215,582			256,165
Net deferred tax assets	18,407			13,269
Deferred tax liabilities
Property, plant and equipment	237			406
Intangible assets	33,790			29,870
Total deferred tax liabilities	34,027			30,276
Net deferred tax liabilities	$	(15,620	)	$	(17,007	)

Activity within the valuation allowance for deferred tax assets during the years ended December 31, 2017, 2016 and 2015 was as follows:



	2017			2016			2015
Valuation allowance at beginning of year	$	256,165		$	190,174		$	161,660
Increase (decrease) in valuation allowance as a result of
Mergers and acquisitions, net	—			(1,416		)	1,228
Current year operations	26,619			67,549			28,035
Adoption of ASU 2016-09	17,843			—			—
Provisional impact of the Tax Act	(87,473		)	—			—
Changes in foreign tax rates and foreign tax reforms	1,327			—			—
Foreign currency translation adjustment	1,101			(142		)	(749		)
Valuation allowance at end of year	$	215,582		$	256,165		$	190,174

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Due to the Company and its subsidiaries' histories of net losses incurred from inception, any corresponding net domestic and certain foreign deferred tax assets have been fully reserved as the Company and its subsidiaries cannot sufficiently be assured that these deferred tax assets will be realized. The components of the deferred tax assets and liabilities as of the date of the mergers and acquisitions by the Company prior to consideration of the valuation allowance are substantially similar to the components of deferred tax assets presented herein.

The Company's past issuances of stock and mergers and acquisitions have resulted in ownership changes as defined in Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"). As a result, utilization of portions of the net operating losses may be subject to annual limitations, however as of December 31, 2017, all such limited losses applicable to Intrexon, other than losses inherited via acquisition, have been fully utilized. As of December 31, 2017, approximately $33,590 of the Company's domestic net operating losses were inherited via acquisition, including $13,376 acquired via the acquisition of GenVec, and are limited based on the value of the target at the time of the transaction.

As of December 31, 2017, the Company has loss carryforwards for U.S. federal income tax purposes of approximately $244,274 available to offset future taxable income and federal and state research and development tax credits of $7,737, prior to consideration of annual limitations that may be imposed under Section 382. These carryforwards will begin to expire in 2022. The Company's direct foreign subsidiaries have foreign loss carryforwards of approximately $151,423, most of which do not expire.

The Company does not record deferred taxes on the undistributed earnings of its direct foreign subsidiaries because it does not expect the temporary differences related to those unremitted earnings to reverse in the foreseeable future. As of December 31, 2017, the Company's direct foreign subsidiaries had accumulated deficits of approximately $65,052. Future distributions of accumulated earnings of the Company's direct foreign subsidiaries may be subject to U.S. income and foreign withholding taxes. The Company is evaluating this accounting assertion in light of the Tax Act.

The Company does not file a consolidated income tax return with AquaBounty. As of December 31, 2017, AquaBounty has loss carryforwards for federal and foreign income tax purposes of approximately $28,209 and $15,653, respectively, and foreign tax credits of approximately $2,832 available to offset future taxable income, prior to consideration of annual limitations that may be imposed under Section 382 or analogous foreign provisions. These carryforwards will begin to expire in 2018. As a result of the Company's ownership in AquaBounty passing 50% in 2013, an annual Section 382 of approximately $900 per year will apply to domestic losses and credits carried forward by AquaBounty from prior years, which are also subject to prior Section 382 limitations.

The Company recorded a net provisional income tax benefit of $2,185 upon enactment of the Tax Act, which is comprised of several items. Amounts related to the remeasurement of most of the Company's domestic deferred tax assets as a result of the U.S. corporate rate change to 21% as part of the Tax Act are $87,473, which was fully offset by a reduction in the Company's valuation allowance. The Company's net U.S. deferred tax liability that is not offset by a valuation allowance was similarly written down, and the Company recorded a provisional deferred tax benefit of $1,730. The Company also recorded a provisional current tax benefit of $455 related to the expected refundability of accumulated corporate alternative minimum tax credits. The Company has provisionally estimated its transition tax exposure to be zero, as any accumulated earnings in foreign subsidiaries are offset by accumulated deficits in other foreign subsidiaries.

The provisional amounts recorded are subject to further refinement within the measurement period prescribed by SAB 118. As a result, the recorded amounts are subject to change, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company utilized to provisionally compute the transition impact.

Additionally, in December 2017, Belgium enacted significant tax reform measures, the most significant of which to the Company is the limitation on the utilization of accumulated losses in years after 2017. After that date, loss carryforwards can only be used to offset 70% of taxable income that exceeds a certain threshold. As a result, the Company recorded adjustments to its net deferred tax assets and valuation allowances. These adjustments resulted in a net deferred tax liability of $2,307, which was recorded as a component of deferred tax expense for the year ended December 31, 2017.

The Company and its subsidiaries do not have material unrecognized tax benefits as of December 31, 2017. The Company does not anticipate significant changes in the amount of unrecognized tax benefits in the next 12 months. The Company's tax returns for years 2004 and forward are subject to examination by federal or state tax authorities due to the carryforward of unutilized net operating losses and research and development tax credits.